Late payments to SMEs hit home personally

LATE customer payments are hitting small business operators both as a business and personally, says new research from MYOB.

The latest SME Snapshot revealed 77 per cent of businesses had felt some sort of business impact due to a customer not paying their bills on time.

The effects of late payment include impacting business owners' personal finances (35 per cent) and the ability to cover expenses such as rent and power (32 per cent).

Late payment also takes an emotional toll on SMEs, with 52 per cent confirming it impacts their stress and anxiety levels.

Tim Reed, CEO of MYOB said the results indicate a clear call for action.

"It's unfair that many small business owners are being subjected to late payments on top of the day to day challenges of running their own business. The financial health of Australia's small business owners should be a top priority and the research indicates this also has a direct impact to their own personal wellbeing.

"Improving this situation to ensure all businesses are being paid on time should be a shared responsibility across Federal Government and businesses of all sizes," said Mr. Reed.

Key findings include:

77 per cent of businesses are impacted when a customer doesn't pay

35 per cent of SMEs said late payments effect their personal finance

32 per cent of SMEs said late payments effect their ability to cover expenses such as rent and power

Over half (52 per cent) indicated late payments impact their stress and anxiety levels

72 per cent agree regulations should be introduced by Government to ensure prompt payment

52 per cent indicated a lack of regard for invoicing terms and payment processes as the main reason for late payments

Almost half (46 per cent) of respondents nominated cashflow issues among customers as another key reason for late payments.

The survey also found that 72 per cent of small business owners were in favour of introducing a voluntary code to encourage businesses to pay more promptly.

"Given the overwhelming support for this initiative, it would be a positive move to see the government and big businesses to put forward an initiative to implement a national prompt payment protocol to ensure small businesses are not being delayed payments by other businesses."

This follows a recent call to action from COSBOA calling for the development and implementation of a national prompt payment protocol where signatories voluntarily agree to abide by the rules of the protocol and are publicly recognized for doing so.

"Some big businesses are taking more than 90 days to pay an SME despite agreed payment terms being 30 days - and this can be the difference between insolvency and a healthy business continuing to operate," said Peter Strong, CEO of COSBOA.

When asked what they thought the main reason for late or slow payments were, 52 per cent of survey respondents indicated a lack of regard for invoicing terms and payment processes. This was followed by almost half (46 per cent) of respondents nominating cashflow issues among customers.

"We know from previous MYOB research that cash flow concerns are consistently a top pain point for SMEs, but the lack of regard for their external terms and processes highlights a new concern for these business operators," added Mr Reed.

These findings echo previous MYOB research from last month's SME Snapshot, which revealed 54 per cent of small businesses have previously waited over six months to be paid by a customer, with more than seven in ten writing off money owed to them.